George Soros thinks the U.S. economy will face fears of inflation that in turn will drive up interest rates and choke off growth. Speaking at a breakfast hosted by the Wall Street Journal, Soros said borrowing costs are the major issues facing the system and predicted a “stop-go” type U.S. economy.
Mr. Soros also talked about economic bubbles. He stressed on the necessity that the international financial markets have for global regulation, even while being critical of regulators and calling for minimal government intervention.
From Reuters: “The idea of self-correcting markets is a misconception,” he said. What governments need to do… is recognize they cannot prevent bubbles but instead try to control them from getting bigger.
“You cannot prevent bubbles from forming but prevent them from self-reinforcement,” Soros said.
Soros….acknowledged that getting regulation right is not easy as he argued both for and against stricter supervision.
“The regulators will always be wrong,” he said. “They should interfere as little as possible.”
Regulators, he said, typically try to control money supply and then let free markets take care of everything else, but that is a fallacy.
By the same token, Soros said that efforts by regulators and governments to stop bubbles bursting for more than 25 years gave rise to the most recent “super bubble.”
Soros also warned investors that “while the worst of the 2008 crisis is past, investors do not appear to have learned their lesson.
“People want to pretend the crisis never happened,” he said. “They want to go back to business as usual.”